EXCLUSIVE-Microsoft urged to put Mulally, Lawrie on CEO shortlist

Sept 10 (Reuters) - At least three of the top 20 investorsin Microsoft Corp want a turnaround expert to succeedSteve Ballmer as chief executive and have urged the technologygiant's board to consider Ford Motor Co CEO Alan Mulallyand Computer Sciences Corp CEO Mike Lawrie for the job,several sources familiar with the matter said.

The special committee of the board, which is conducting theCEO search, and its advisers have been meeting with shareholdersafter Ballmer's surprise decision late last month to retirewithin a year, the sources said. It could name a CEO as soon asthe end of this year, the sources said.

In one such meeting, Microsoft said it started with a listof about 40 people, including internal and external candidates,and has been narrowing it down, one of the sources said.

It wasn't clear whether the Microsoft board had reached outto any of the potential candidates suggested by investors orwhether it was even considering them. The names of othercandidates in the mix could not be learned.

Microsoft declined comment on Monday. Lawrie and Mulallycould not be reached for comment. But last week, Mulally toldReuters that he was "absolutely focused on serving our Ford."

The sources requested their identity as well as those of theinvestors be kept anonymous because the discussions wereprivate.

The search for a new chief executive of the world's largestsoftware maker is one of the most closely watched developmentsin the technology sector this year.

Microsoft remains highly profitable, but it has struggled togain traction in the mobile device business against rivals suchas Apple Inc and Google Inc.

In July, the company unveiled a deep reorganization totransform into a "devices and services" leader, but has so farfailed to convince investors that its strategy will work. In asign that shareholders had already lost confidence in Ballmer,Microsoft's shares rose 7 percent after news of his plannedretirement. [ID: nL2N0GO0K3]

Last week, Microsoft said it would buy Nokia's phonebusiness and license its patents for 5.44 billion euros ($7.1billion). Shares of the software company fell as much as 6percent as investors protested the acquisition of anunderperforming and marginalized unit that made a $3 billionoperating loss in 2012.

The move also brings Stephen Elop, who ran Microsoft'sbusiness software division before jumping ship in 2010, back tothe company, positioned as another candidate to succeed Ballmer.[ID: nL6N0GZ04Z]

Microsoft Chairman and co-founder Bill Gates, who is stillthe company's largest shareholder with a 4.8 percent stake andis on the four-member special committee, will likely have a vetoon the new CEO choice.

Gates, who has focused his day-to-day activities onphilanthropy for the last five years, has not given anyindication of what kind of CEO he favors.

TURNAROUND MEN

Investors are attracted to Mulally and Lawrie because bothhave histories of successfully turning around companies,although the Ford CEO is more widely known thanks to hisdramatic reversal of the No. 2 U.S. automaker, the sources said.

Under a succession plan at Ford outlined last November,Mulally, 68, is expected to stay on as CEO until at least theend of 2014. But people with knowledge of the matter said theexecutive may step down sooner than planned if he finds anappealing new role. [ID: nL2N0H2182]

"There is no change from what we announced in November: AlanMulally plans to continue to serve as Ford's president and CEOthrough at least 2014," Ford spokesman Jay Cooney said.

A role as the head of Microsoft would allow him to follow uphis seven-year tenure as Ford's CEO with another high-profilejob. It would also bring him back to Seattle, where he livedduring his nearly four decades at Boeing Co and still hasa home.

The other candidate on investors' radar is Lawrie, along-time IT executive who engineered a complex fix at UK-basedMisys Plc, a financial software company, before joining ComputerSciences in 2012.

Computer Sciences, which is in the midst of a multiyearturnaround plan under Lawrie, declined to comment.

Lawrie also spent nearly three decades at IBM, wherehe worked alongside John Thompson, Microsoft's lead independentdirector who is heading the special committee, the sources said.

In 2005, Lawrie worked for about a year as a general partnerof activist investor ValueAct Capital, a Microsoft shareholderthat had pressed for Ballmer's ouster and has been offered aseat on the company's board.

IBM EXPERIENCE

Even though Ballmer was more a salesman than a technologyspecialist, a choice of Mulally, who comes from outside thetechnology sector, would be a radical departure for theindustry.

The major precedent for such a move was IBM's successfulhiring of Louis Gerstner, a manager from the financial industrywho turned around the struggling computer company between 1993and 2002. John Sculley, who went from PepsiCo to leadApple from 1983 to 1993, was not regarded as being verysuccessful.

Despite its problems, Microsoft is not yet in such a direpredicament as IBM was in the early 1990s. Microsoft reported aprofit of $22 billion last year, despite falling sales of PCs,which are still the key to its main businesses.

Its online and mobile computing efforts do not make money.Its Bing search engine and other online ventures have lostalmost $3 billion in the last two years alone, and last quarterthe company took a $900 million write-down on the value ofunsold Surface tablets.

Despite billions of dollars of investment, Windows phonesstill have less than a 4 percent global market share, accordingto the latest figures from research firm IDC.

(Additional reporting by Bill Rigby in Seattle and DeepaSeetharaman in Detroit; Editing by Paritosh Bansal and KenWills)